As the reforms related to tax harmonisation of retirement funds is set to become a reality on1 March – or T-day, as it has become known – it is vital members are communicated with in order to avoid hasty, and potentially damaging actions.
There has been much uncertainty from members as to how they will be impacted. The below Q&A aims to assist provident fund and pension fund members understand the latest amendments and to what extent they are impacted by the changes.
Provident fund members
Can a member get their provident fund savings in cash if they resign, are retrenched or dismissed prior to retirement?
Yes they can still take their benefit in cash. There is no change to this right.
What happens when members retire after 1 March 2016?
Only the contributions made after 1 March 2016, plus investment growth thereon, will be subject to the new rules.
What are the new retirement benefit rules?
All members’ savings up to 1 March 2016 (called T-Day) plus investment growth will be treated in the same way as before. These savings are referred to as the member’s "vested rights”. These are completely unaffected by the new legislation.
After T-Day all members of provident funds who are under age 55 and whose retirement savings, as reduced by their "vested right” amount, is more than R247 500, will be required to buy pensions / annuities using at least two-thirds of this amount.
This annuity will secure for the member a regular income (usually monthly) for life.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.